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Big picture, little picture…

3/5/2019
Big picture, little picture…
The big picture has improved dramatically over the last few weeks. The market has stormed back from the December 24, 2018 lows. The government is open for business again. The US and China are hopeful agreement can be reached, that will give worldwide relief from tariffs. Spring is on the way.
Our view is that the market made a significant low on December 24th, 2018. These types of selling squalls typically happen near the end of corrections, not at the beginning. That correction began last January, with the market at all time highs. The correction lasted only 11 months and removed 18.14% of market value basis the S & P 500. Very challenging!
The rally late last year, continuing into Fridays close has been historic. It has left the market very overbought, and perhaps due for a consolidation, or pullback. The breath has been remarkable (breath = number of stocks participating). This contributes to my belief that we are beginning the next leg of this secular bull market.
Let’s also acknowledge an assist from the Federal Reserve. The Fed was determined last year to return monetary policy to neutral, after the extreme accommodative stance it assumed during the financial crisis in 2008-09. The Fed moved rates up to the lower end on neutral as the global economy began to slow. When the market tanked, due the Fed and the issues mentioned earlier, the Fed changed course. Chairman Powell said the Fed would become data driven and was not locked in on the next move. Victory for the US, and world economies.
The US economy remains strong. The Fed may be orchestrating a soft landing.
The market is due for a rest, or a pullback. The FANG stocks are underperforming, which does not bother me. That indicates there is rotation to other sectors that are strong besides technology. We are seeing some emerging stocks in the housing sector. The sector could improve with lower interest rates. The surprise here may be that the pullback is quite mild. We will see.
In bull markets, the surprises are on the upside. This rally has certainly surprised many, and likely most. I think there is still room to run for the bulls and wish you all success in your investment strategies.
Enjoy the day…r2